Non-Performing Assets (NPA)

Finance Minister urged public sector banks to ensure the fair and transparent identification of non-performing assets (NPAs).

Context:

Finance Minister urged public sector banks to ensure the fair and transparent identification of non-performing assets (NPAs).

About Non-Performing Assets:

  • Refers to loans and arrears provided by banks or financial institutions where the repayment of principal and interest is delayed for a period exceeding 90 days.
  • Commercial loans that are over 90 days past due and consumer loans that are over 180 days past due are commonly categorized as nonperforming assets by banks.
  • Classification of NPAs –
    • Standard assets: NPAs aged from 90 days to 12 months
    • Sub-standard assets: NPAs aged up to 12 months.
    • Doubtful assets: NPAs aged over 12 months.
    • Loss assets: Identified losses not yet written off by the bank or its auditors.

About National Asset Reconstruction Company Limited (NARCL):

  • A government entity established in 2021.
  • Aim – To create a bad bank containing an asset reconstruction company (ARC) and an asset management company (AMC) to manage and recover dud assets.
  • Stakeholders: Public and Private Sector Banks
  • Sponsor Bank: Canara Bank
  • Registered with RBI under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

A ‘bad bank’ is a financial entity set up to acquire NPAs from banks and resolve them which has been tried out in countries such as the U.S., Germany, Japan etc.

Source: The Hindu


Non-performing assets (NPAs) decline in value when

  1. Demand revives in the economy.
  2. Capacity utilization increases.
  3. Capacity utilization, though substantive, is yet sub-optimal.
  4. Capacity utilization decreases consequent upon merger of units.

Which of the above statements are correct?

[UPSC Civil Service Exam – Prelims – 2018]

a) 1, 3 and 4 only

b) 1, 2 and 4 only

c) 1, 2 and 3 only

d) 1, 2, 3 and 4


Consider the following statements:

  1. A bad bank is a financial entity set up to buy non-performing assets (NPAs), or bad loans, from banks.
  2. NPAs that have been past due for anywhere from 90 days to 12 months are classified under Sub-standard assets.

Which of the statement(s) given above is/are not correct?

 
 
 
 

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